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Weathering the Oil and Gas Storm

Weathering the Oil and Gas Storm

It’s a bit of a bloodbath right now in the North American oil and gas sector with mass layoffs and cries of Armageddon emanating from the C-Suites in the skyscrapers.

For investors, however, it’s a bit of a long game. Like all commodities, a glut of product typically induces a price drop, but as long as there’s demand, prices always recover.

Taking a look at a company such as Canadian Natural Resources (CNR), the ubiquitous Canadian oil producer, it all depends on how you frame the investment.

Here’s what the stock looks like in the last 3 months. A high around $83 and a low around $70 which is enough to send a skittish investor fleeing to the mountains to bury his cache of gold and silver under an unmarked grave.

CNRL B

But now let’s look at CNR over the last 10 years and plot it out. What started at about $18 is now almost $80 taking into account splits and dividends:

CNRL A

Let’s say that 10 years ago you spent $300 per month on gas. If you spent that same amount over the year($3600) and invested it in CNR, you’d be sitting at $16,000 today. That pays for a lot of gas today.

However, it is somewhat pointless to discuss what might have been. It is about identifying the opportunity in the first place. Take a small producer such as Quattro Exploration and Production (QXP), the full chart since they first started matches what the poor market dictates:

QXP

With hundreds, if not thousands of companies like Quattro (QXP) trying to set themselves apart from the many junior oil producers living under the shadows of CNR, it’s difficult to make a stock heard.

A simple Google search will show QXP’s 2015 second quarter financials stating they actually MADE money in this market (link to press release).  When you look at QXP’s high of nearly $0.90 and now at $0.22, even a modest recovery in the oil market will mean a lot of free gas in your portfolio.

It’s about making educated guesses and when a company such as QXP has its investor presentation, updated news center.

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